Yahoo to lay off 15% of workforce amid $400M cost-cutting – USA TODAY
Struggling search engine company Yahoo Inc. said it plans to cut about 15% of its workforce as part of a $400 million cost-cutting effort intended to “simplify”Â the troubledÂ Net company.
The Sunnyvale, Calif.-based YahooÂ plans to lay off aboutÂ 1,500 employees and close five offices in Dubai, Mexico City, Buenos Aires, Madrid, and Milan âÂ with the bulk of cuts by the end of March, Yahoo said Tuesday.
By the end of 2016, the online and mobile advertising companyÂ expects to have aboutÂ 9,000 employees and fewer than 1,000 contractors, down from closer to 12,000 last year.
The cuts were announced as part of Yahoo’s newly announced goal toÂ “simplify the company” amidÂ criticisms that Mayer has failed to grow it throughÂ acquisitions and hiring. In addition to staff reductions, Yahoo will thin its online and mobile offerings to support those that generate the most revenue.
Also, as the company attempts to separate its Internet advertising and media business from its $25 billion stake in Chinese Net retailing giantÂ Alibaba, Yahoo’s board will entertain strategic proposals,Â which could potentially include either a sale of part of the company or a potentialÂ merger.
Yahoo (YHOO) shares fell about 2%Â in after hours trading to $28.44, however, as shareholders digested the new plan and the news that Charles Schwab has stepped down from the board, marking the second director to resign in just two months.
Board member Max Levchin departed in December.Â Shares closed Tuesday at $29.08Â down 1.66%.
Mayer’s planÂ to simply the business through downsizingÂ is likely aimed at pleasing shareholders whoÂ have been callingÂ on her to concede that her turnaround plan has failed and put the core Web businesses up for sale.
But some Yahoo shareholders said they were not impressed by Tuesday’sÂ plan.Â Yahooâs simplificationÂ strategy “does not fully address the core issues which have destroyed shareholder value – poor capital allocation, bad strategic partnerships, out of control spending and a bloated workforce,â hedge fund firm SpringOwl said in an emailed statement.
SpringOwl has previously called for Yahoo to radically cut costs andÂ hire a new CEO to carry it out.
Last month, hedge fund investor Starboard Value threatened a board battle unless âsignificant changeâ is made, including a new CEO and efforts to sell the company.
In all, Yahoo said it will reduce operating expenses byÂ more than $400 million by the end of 2016 by dropping support for products like Yahoo Games.Â It also plans to raise as much as $1 billion in cash through theÂ saleÂ ofÂ non-strategic assets, including real estate.
âWe believe a simplified Yahoo will increase shareholder value over the long term,â said CEO Marissa Mayer during a conference call Tuesday. âHaving fewer products means we can improve those products faster and increase profitability and focus.â
However, the changes will also result in a âtransition yearâ with lower revenue and earnings, she said.
Yahoo expects revenue after subtracting the cost of traffic acquisition will range, in the first quarter 2016, from $820 million to $820 million, a decline of at least 14%, and for fiscal year 2016 revenue of $3.4 billion to $3.6 billion, a 12% drop.
Yahoo Tuesday also reportedÂ fourth-quarter earnings of 13 cents, beating analysts’Â expectations of 12Â cents per share, according to S&P Capital IQ Consensus Estimates. Fourth quarter revenue of $1 billion beat estimates of $948 million.
Starboard â owners of 0.8% of Yahoo’s outstanding shares â initially urged Yahoo to spin offÂ its 15% Alibaba stake.Â But the value of thatÂ stake fell from $40 billion to about $25 billion and in November Starboard urgedÂ Yahoo to reconsider selling some of its core assets instead.
Tuesday’s announced layoffs are just the latest in a history of large layoffs conducted by Yahoo. Most recently, Yahoo CEO Scott Thompson in April 2012Â announced the company’s largestÂ staff reductionÂ of about 2,000 employees or 14% of the 14,100 workers.
In advance of Tuesday’s announcement, analysts’ expectations ofÂ layoffs ranged fromÂ 10% to 25% of the company’s nearly 11,000 estimated employees.
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